In an effort to alleviate the burden faced by individuals in financial distress, the government has introduced several initiatives. One such initiative is the provision of bankruptcy discharge to individuals declared bankrupt with small-scale debts below RM50,000, starting from 1st March 2023.
According to Deputy Minister in the Prime Minister's Department (Law and Industrial Reform) Ramkarpal Singh, a total of 31,140 youths were declared bankrupt from 2014 to May 2023, as reported by the Malaysian Insolvency Department (MDI).
Photo via The Sun Daily
The amendment to the Insolvency Act 1967 (Act 360) and the Insolvency (Amendment) Bill are among the government's initiatives to assist the young individuals who face bankruptcy. These initiatives include providing bankruptcy discharge to individuals declared bankrupt with small-scale debts below RM50,000, subject to certain conditions, starting from 1st March 2023.
"MDI has also amended section 5(1)(a) of the Insolvency Act 1967 (Act 360) through the Insolvency (Amendment) Act 2020 (Act A1624), which was gazetted on 22nd October 2020 and came into effect on 1st September 2021," he said.
He further explained that the amendment aims to reduce the percentage of registered bankrupt individuals, particularly among the youth, by setting a minimum debt threshold of RM100,000.
"The amendment aims to establish a minimum debt threshold of RM100,000, indirectly helping to reduce the percentage of bankruptcies registered with MDI, including among the youth," he said in response to a question posed by Senator Mohd Hasbie Muda.
Additionally, to assist this group, the government introduced automatic discharge provisions in 2017 under Act 360, whereby bankrupt individuals are discharged from bankruptcy within a short period of three years from the date of filing the Statement of Affairs (SOA) with MDI.
"The government has also made improvements to the automatic discharge provisions through the Insolvency (Amendment) Bill 2023, which was passed in the Dewan Rakyat on 24th May and the Dewan Negara on 19th June," he added.
Moreover, Ramkarpal mentioned that the government, through Bank Negara Malaysia, has collaborated to assist this group through the implementation of the Fair Treatment Principles for Financial Consumers and Financing Practices, which play a role in helping the public overcome serious debt problems.
"Financial institutions must ensure that borrowers facing difficulties in repaying loans are treated fairly and given due consideration," he emphasized.
Earlier, it was reported in the media that only one out of three Malaysians possesses financial literacy, leading to a lack of awareness about saving. This situation is also influenced by factors such as a lack of knowledge about financial issues and the tendency to overspend using credit cards and borrowing from loan sharks.
According to Prof. Datuk Dr Norma Mansor, Director of the Social Wellbeing Research Centre (SRWC) at the University of Malaya, the number of bankruptcies among the population is increasing due to a propensity for excessive borrowing.